By Mike Bodeen · 6 September 2021
Investors and iBuyer’s Tilting the Market?
How the market turns. Just when we think we’re figuring out what’s going on in the Phoenix Metro residential real estate market, it makes a U-Turn. It (the market) obviously doesn’t give a rip about our prognostications.
Let’s look at August’ numbers:
Active Listings: 6,873 vs 8,028 last year – down 14.4% – and down 3.3% vs 7,105 last month
Under Contract Listings: 12,032 vs 13,042 last year – down 7.7% – but up 8.9% vs 11,044 last month
Monthly Sales: 9,051 vs 9,213 last year – down 1.8% – and down 1.0% vs 9,146 last month
Monthly Average Sales Price per Sq. Ft: $249 vs $195 last year – up 28% – but down 0.5% from $251 last month
Monthly Median Sales Price: $401,000 vs $325,000 last year – up 23.4% – and up 0.3% from $400,000 last month
Surprising changes have occurred in the market over the past month. Expecting the listing inventory to continue growing, it actually decreased, dropping 3.3% from last month. After rising almost 25% during July, this catches us by surprise. According to the Cromford Report, this unexpected fall is mainly caused by two factors:
the rate of arrival of new listings has started to fall, especially over the last 2 weeks
the demand from iBuyers and investors has intensified, taking listings under contract more quickly than usual
(Note: iBuyers are large companies in the business of buying low and selling high. OpenDoor, Offerpad and Zillow to name a few)
The strength of the pending and under contract counts, also come as a surprise. It seems as if ordinary home buyers are losing some of their motivation, due to price increases that are vastly higher than last year. Despite low interest rates, affordability has slipped below the normal range for Greater Phoenix.
Sales counts (closed listings) are still lower than last month and last year, but by much smaller margins than in July.
The monthly average price per SqFt (PSF) dropped for the second straight month, but the fall was just 0.5% each month and Cromford does not think this will be repeated in September based on the contracts that have been signed during August.
For buyers, the good news is that runaway appreciation that happened in January through May has been halted. In fact, if it were not for the strong activity of investors and iBuyers, and particularly the latter, the market would have cooled during August. This would have been following the trend established since April.
However, iBuyers have purchased so many homes over the last month that they are significantly distorting the market dynamics. These homes are mostly going to be re-marketed shortly, so at least they’re only temporarily being removed from the market.
Will a larger than normal deluge of these listings arriving back on the market in the near future impact pricing? Perhaps, but that depends if the buyers/investors are going to rent them out. Based on the skyrocketing rental market, that could happen.
Stay tuned. There will no doubt be more U-Turns ahead.
Market data referenced in this article comes from The Cromford Report.